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2013/14 Semester One Question OneWhether Amenders has a claim against either Tony and/or Bruce, it is necessaryto determine if Tony and Bruce had breached their duties to Amenders asdirectors. Under S157 of the Companies Act, a director is “shall at all times act honestlyand use reasonable diligence in the discharge of their duties” as directors. Aspart of their duty to act honestly, a director is required to act in the best interestof the company when exercising his powers as a director. This requires thedirector amongst other things to avoid a conflict of interest and avoid earningsecret profits. A similar to duty to act in the interest of the company is also found undercommon law. This duty is imposed on the director as a fiduciary of the companyand has a similar requirement to avoid conflict of interest and avoid earningsecret profit.In the case of Tony, he had formed Ironmen. He is the sole shareholder anddirector of the Ironmen. Ironmen is also a company which directly competes withAmenders. Therefore Tony’s interest in Ironmen would be a clear a conflict ofinterest. The law on conflict of interest requires the director to avoid a situationwhere his personal interest may conflict with the interest of the company(Amenders). In the event there is a possible conflict of interest, he would berequired to disclose his personal interest to the company and seek approval fromthe company. If the company gives their approval, there would be no liability.Tony however did not inform Amenders of his involvement in Ironmen. Tony also used his position as director of Amenders to enter into a contract withIronmen to supply iron hinges. It can be assumed that the contract was beneficialto Ironmen and as a result, Ironmen was able to earn profits from the contract. Inthis regard, it is therefore possible that Tony had indirectly earned secret profitsfrom the contract.Finally, Tony used his position as director of Amenders to persuade long-timecustomers of Amenders to use Ironmen’s services. This will directly affectAmenders since they will be losing long-time customers to Ironmen and Tony istaking up business opportunities for himself rather than Amenders. This wouldalso clearly be a conflict of interest and a breach of his duty as director.(Canadian Aero Service V O’ Malley) Under common law, the director who benefited from a business opportunitymade known by virtue of his position of director may also be made to account forthe profits earned from the business opportunity. (IDC v Cooley)A breach of S157 would result in the director being personally liable to accountfor profits and to indemnify the company for any losses suffered by the company.In addition, the director would be committing an offence and is liable to bepunished with a fine or imprisonment.